Reverse Mortgages And Home Reversions Essay

Question:

Discuss about the Reverse Mortgages and Home Reversions.

Answer:

Introduction:

It can be stated that in order for a promise to be regarded as an offer, the offeror must establish that he intended to be bound by the offer as held in the case of Harvey v Facey [1893] UKPC 1. However, it is to be mentioned that an offer is to be distinguished from an invitation to treat. It is worth noting that subsequent to acceptance of an offer a valid contract is formed between the parties. However, an invitation to treat cannot be accepted. Goods on display in shops are not to be regarded as offers but mere invitation to treat as held in the case of Fisher v Bell [1961] 1 QB 394. Advertisements are generally treated as invitation to treat. This can be substantiated by the judgment of the Partridge v Critenden (1968) 2 All ER 425. However, there is an exception to the aforementioned rule. In some instances advertisements can amount to offers as established in the remarkable case of Carlill v Carbolic Smoke Ball co [1893] 1 QB 256. In this case an advertisement had been given by the Carbolic smokeball company that a reward of 100 pounds would be paid to anyone who contracts influenza after using the smoke ball produced by them three times daily for two weeks. Mrs. Carlil had purchased the smokeball and used it according to the instructions of the advertisement. However she c contracted influenza. Thereafter she claimed the 100 pounds as per the terms of the advertisement. It was held by the court that Mrs Carlil was entitled to receive the 100 pounds as the advert constituted a unilateral offer which he had accepted by the performance of the terms of the offer. The court in this case rejected all the arguments of the defendant.

It can be stated that party to a contract is entitled to claim damages if the terms of the contract are misrepresented. In the case Bisset v Wilkinson [1927] AC 177, it had been held that for proving misrepresentation of a terms of contract, the aggrieved party must establish that the contract contained a false statement of fact or law. It is important for the misrepresentee to establish that the he relied on such representation and entered into the contract subsequently by being induced by the terms contained in misrepresentation as held in the case of Horsfall v Thomas [1862] 1 H&C 90. As held in the case Derry v Peek (1889) 5 T.L.R. 625 misrepresentations can be fraudulent if the misrepresentor produced a statement:

Recklessly, careless to assess whether the statement produced was true or false

Negligent misrepresentation can be termed as representation of a statement without reasonable grounds to believe that such representation is true as held in the case Howard Marine v Ogden [1978] QB 574.

Misrepresentation can also be categorized as wholly innocent misrepresentation if it is established that representor had reasonable grounds to believe that the representation was true. In case of fraudulent misrepresentation the misrepresentee is entitled to receive damages or rescind the contract as held in the case of Doyle v Olby [1969] 2 QB 158. In case of negligent misrepresentation same remedies are available as if it were made fraudulently as held in the case Royscott Trust v Rogerson [1991] 2 QB 297. However, in case of innocent misrepresentation the claimant cannot rescind the contract or claim damages.

An exclusion clause or exemption clause can be defined as a term in the contract which aims to limit the liability of either of the parties to the contract. However, for any party to rely on the exclusion clause it is important to bring it to the attention of the other party to the contract as held in the case Olley v Marlborough Court [1949] 1 K.B. 532.

The doctrine of Contra proferentem is relevant in this given scenario. It can be stated that when it comes to interpreting exclusion clauses, the courts generally interpret an ambiguity against the person who is at fault and wishing to rely on the exclusion clause. Liability can be restricted or excluded only if the words of the exclusion clause are precisely clear.

In this given scenario, it has been provided an advertisement had been put up by the Desert Island Disks which stated that customers are free to choose any disk of Beyonce for 2.99 dollars or choose five disks for 12.99 dollars. She relied on such offer can chose five disks of Beyonce as per the terms of the offer. Therefore in this case it is evident that the advertisement can be treated as an offer by the application of the Carlilv Carbolic Smoke ball case. Annie performed the terms of the offer and subsequently a unilateral contract had been formed. However, it was later realized by Annie that she had been charged 12.99 dollars for each disk. In relation to the facts of the case, it can be stated that the shop had misrepresented the terms offer which had been given through the advertisement. The misrepresentation can be termed as negligent misrepresentation as Desert Island Disks did not make reasonable effort to check the truth of the statements represented. Thus by the application of the Howard Marine v Ogden case, it can be stated that Annie in this given scenario is entitled to rescind the contract and return the disks. Further, it can be stated that the disks did not contain the original songs of Beyonce as most of the songs were cover versions of Beyonce’s songs by other artists. However, it was clearly provided in the advertisement that disks contained Beyonce’s songs and albums.

In this given scenario Desert Island Disks can aim to limit their liability by relying on the exclusion clause. However the terms in the exclusion clause were ambiguous and the courts are likely to interpret them against the Desert Island Disks by the application of the Contra proferentem rule.

Thus to conclude, it can be stated that Annie in this given scenario can return the disks and recover the she spent to buy them. Desert Islands Disks cannot rely on the exclusion clause as the terms of such clause were ambiguous

The issue related in this scenario is whether Dodo will be responsible for the debts occurred.

As per the Property Law Act, 1958 joint tenancy is referred to a form of tenancy that consists of the right of survivorship. For instance, if an owner dies, the individual’s share of property will be transferred to the other person automatically. When a joint tenancy is formed, all the existing owners are required to invest interest in the property. The title of the property is acquired at the same time and on the same document (Liu & Roca, 2015). As per the legislation, majority of the joint tenancies are financed with a single shared mortgaged. It was observed in the case of Frazer v Walker [1967] 1 AC 569 that it highlights the significance of registering an interest in land. For a land to be kept as mortgage, one must put another product in return. However, being a joint owner of a land, the will have few specific rights (Watson, 2017). Firstly, it includes the money that is owed from renting the property to rights. Secondly, the profits from the sale of the natural resources and the commercial revenue will also be considered. According to the legislation, it has been stated that the rent and profits shared will depend on how much hold that individual has on the property (Li, Aw & Lay, 2017). If the joint owners have equal share in the property, they both will be equally entitled and liable for it. The rights have been exercised in the case of Abigail v Lapin [1934] AC 491. Along with rights, the joint owners will have a few specific rights that are exercised by them. Therefore, as a joint owner, they will be entitled in paying the share of taxes, payment of mortgage, repairs, maintenance and fees and other requirements as mentioned by the State. However, if the property is not used then the other owners should be provided with compensation. Thus, if one of the joint owners have violated or breached the contract or agreement, then they said joint owner must fix the mistake and pay the compensation amount of their violation (Haffner, Ong & Wood, 2015).

The above mentioned statute or rule can be applied in the scenario. As observed from the facts of the case, Pina and Dodo were the joint owners of a vacant plot where a building was suppose to be built. It was noticed in this case study that due to the increasing rent, and he had built a shack and therefore he had to put this plot of land in mortgage to the Victoria State Bank without seeking Dodo’s permission. Dodo was unaware of the activities because he used to live in Queensland. However, the shack was not looked after and hence there were complaints by the neighbors. A legal notice was served to both Dodo and Pina for removing the shack. Both of them were also chased by the bank for clearing out the money. However, the case of Frazer v Walker [1967] can be applied in this scenario stating that both the joint owners have a specific rights and duties that needs to be exercised. Dodo being one of the joint owners did not have the knowledge of the activities or decisions that Pina had taken. However, as per the statute, Dodo will be liable and responsible for these debts as per the legislation. This has been proved in the case above mentioned. Since both of them were joint owners therefore, they will be entitled to equal amount of profits and losses of the land. Although, he was not involved or informed regarding the mortgage but he will be responsible for clearing the debts that he owes to the Bank. However, Pina should be the one responsible for the debts but since both Dodo and Pina were joint owners, Dodo will be responsible for the debts equally as per the statute.

References:

Abigail v Lapin [1934] AC 491

Alai, D. H., Chen, H., Cho, D., Hanewald, K., & Sherris, M. (2014). Developing equity release markets: Risk analysis for reverse mortgages and home reversions. North American Actuarial Journal, 18(1), 217-241.

Bisset v Wilkinson [1927] AC 177

Carlill v Carbolic Smoke Ball co [1893] 1 QB 256.

Derry v Peek (1889) 5 T.L.R. 625

Doyle v Olby [1969] 2 QB 158

Fisher v Bell [1961] 1 QB 394

Frazer v Walker [1967] 1 AC 569

Haffner, M. E., Ong, R., & Wood, G. A. (2015). Mortgage equity withdrawal in Australia: Recent trends, institutional settings and perspectives. Documento de trabajo de la OTB, Universidad Tecnol?gica de Delft.

Harvey v Facey [1893] UKPC 1

Horsfall v Thomas [1862] 1 H&C 90

Howard Marine v Ogden [1978] QB 574

Li, J., Aw, G., & Lay, K. (2017). Reverse mortgages-risks, pricing, and market development. Australian Journal of Actuarial Practice, 5, 55.

Liu, B., & Roca, E. (2015). What drives mortgage fees in Australia?. Accounting & Finance, 55(3), 861-880.

Olley v Marlborough Court [1949] 1 K.B. 532

Partridge v Critenden (1968) 2 All ER 425

Royscott Trust v Rogerson [1991] 2 QB 297

Watson, B. (2017). Covered Bonds in Australia. RBA Bulletin, 53-62.

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